Got a tricky question? Receive an answer from students like you! Try us!

Sovereign Default risk in the Euro zone A further look at a possible exit. - Dissertation Example

Only on StudentShare
Masters
Dissertation
Finance & Accounting
Pages 35 (8785 words)

Summary

Sovereign Default Risk in the Euro Zone: A further look at a possible exit Abstract Logistic regression analysis of panel data relating to 24 countries was used to develop a model to predict the probability of default in the Euro zone. In addition to that country specific data was also used n developing a Cypriot model…

Extract of sample
Sovereign Default risk in the Euro zone A further look at a possible exit.

The resulting models which were arrived at using the forward stepwise procedure passed various goodness-of-fit tests as well as other tests of the significance of coefficients. This indicates that both CDS spread and Debt/GDP ratio improved the model’s predictive power in the case of the Euro zone while CDS spread was the only significant factor for Cyprus. Tests of the model using in-sample and out-of-sample data shows that it is capable of predicting default and non-default with a high degree of accuracy. 1.0 Introduction Sovereign default has been present in world economies throughout history. One of the countries that have defaulted in the past is Argentina. Very often, it is the same set of countries that are habitually in this state of economic crisis. The 2008 financial crisis has been described as one of the worst to be felt in this modern age since the Great Depression of 1933 (Your reference here). Its effects are still underway and countries around the world are trying their utmost to maintain financial stability. One of the newest currency unions and the most powerful in the world; the Euro-Zone, therefore makes an interesting study. ...
Download paper
Not exactly what you need?

Related Essays

A Credit Default Swap (CDS)
The creditor must make periodical payments (which are taken to be insurance premium) to the insurer, and the insurer will pay the creditor in case the there is default. The fixed periodical payments made by the creditor or the buyer of a Credit Default Swap are known as the CDS fee or commonly referred to as CDS spreads. The buyer of the Credit Default Swap can only receive the exact value of the credit or loan and can not be compensated beyond that value. The seller of the Credit Default Swap (or the insurer) takes possession of the defaulted credit or loan, obtains right of ownership and can…
9 pages (2259 words)
The reserch paper on The Euro Crisis
This common national currency Euro is utilised by over 300 million people in the world’s most developed economic region, which is considered as a record in the international monetary system. The common currency Euro was established by the European nations with the objectives of acquiring better integration among member nations as well as to enhance the currency value in the global economy (Feenstra & Taylor, 2012). In the year 1999, Economic and Monetary Union (EMU) was also established with the motive of utilising the single national currency i.e. Euro for all the trade activities performed…
16 pages (4016 words)
European Sovereign-debt Crisis
Attempts by international monetary fund (IMF) to avail 750 billion Euros to financially support countries with high debt situation did not mitigate the situation. The paper will, therefore, explore on the causes and evolution of the debt crisis, its impact on the US market, and some interventions undertaken by the US to mitigate the impact. Causes of the Crisis Many factors can be attributed to the crisis that has seen the credit ratings of countries decline and caused shock in the global financial markets. The European Union has been accused of failing to take timely actions and of lingering…
The Euro Essay
For instance, Germany has been accused to have benefited from the economic integration at the expense of other states like Greece and Italy, which have experienced enormous economic turbulence (Arestis 23). Many parties have argued that the absence of action by the euro leaders could worsen the euro crisis. There are, however, diverse arguments on whether the euro should be maintained or not. It is imperative to note that the genesis of the euro problem is from both the government and the private sector. In Greece, for instance, the government mismanaged their finances despite the large amount…
6 pages (1506 words)
The European Sovereign Debt Crisis
In the year 2001, Greece joined the EU (Schafer, 1). Greece had to pay a return rate that was higher than the fiscal market. Originally it had to decrease its debt to obtain a standard rate of fiscal debit in order to join the EU. After a while, the deficit rate became enormous, thus, leading to the rise of the sovereign debt crisis in the year 2009. Therefore, it is arguable to state that is the starting point of the European debt crisis. This paper will attempt to look at the causes and effects of the European debt crisis. How Greece became the origin and what other countries were affected…
Euro behaviour
3-15). The states intending to adopt the Euro as their currency do so by entering into formal agreements with the European Union member countries. It has also been used in trade negotiations as a pricing tool though not necessarily being used for exchange purposes (Gros, 2011, p.122-123). The inception of a common currency within the European region was not only beneficial to the governments of these countries but was also beneficial to the citizens (Lees and Flowers, 2002, p. 239; Mulhearn, 2008, p.123). Citizens counted on steady prices across the borders, easy transactions and the euro area…
8 pages (2008 words)
The European sovereign debt crisis
Consequently, the euro debt crisis is crucial as one intends to study its spillover effects. This is because the crisis was characterized by decisions and events at a political level (Acharya and Steffen, 2012, p. 12). In this case, the Euro debt crisis will be viewed as a financial phenomenon that affected the European region. Historical events associated with the Euro sovereign debt crisis will investigate the negative watches and downgrades on European governments, financial markets, stock, and bond markets. The Euro sovereign debt crisis reached its peak in March 2012 after Greece…
8 pages (2008 words)